Delta debt woes hit NSW

A healthy increase in profit across the NSW state-owned electricity companies last year has been undermined by the likely collapse of a Delta Electricity subsidiary. The subsidiary, which has already cost the state government $55 million, may not be able to pay its debts.

Delta invested in two renewable energy power plants in northern NSW. The plants burn bagasse (sugar cane waste). But delays, frost and a sharp drop in the price of renewable energy certificates have combined to cripple the venture.

The unit, Delta Electricity Australia, borrowed $68 million from banks and its parent for the Sunshine Electricity venture and is unable to pay it back. Delta forgave its subsidiary’s debt, resulting in a $51 million loss, but says it is not liable for the bank debts. It has also written off another $3.8 million in other money owed by its subsidiary. It is now trying to sell the company’s assets to pay back the banks.

The NSW Auditor-General, referring to the subsidiary, warned last week that “a significant risk exists that the company may trade while it is insolvent". It ordered Delta to conduct a review to “prevent similar losses".

The Australian Securities and Investments Commission would not comment on whether it was investigating the matter.

Asked if NSW Treasury had oversight of the review, a spokesman for the Treasurer said: “Delta Electricity has kept NSW Treasury regularly informed on financial matters related to the Sunshine Electricity joint-venture project."

Delta Electricity chief Greg Everett said the company didn’t need to conduct a formal review because it was well aware of why the investment had failed.

We will document the reasons, take the corrective action and make the information available," he said.“It is a concern," he said. “We don’t like to be involved in any loss-making exercise."

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Asked if the subsidiary was at risk of trading while insolvent, he said: “We pay very close attention to our cash flow. If we were reaching that point we would take the appropriate action. We are still aiming for a sale that would allow the company to pay its debts."

Former Olympics minister
Michael Knight
and former Roads and Traffic Authority chief executive
Paul Forward
sit on the Delta board. They were appointed after Delta made its initial investment in the Sunshine Electricity venture.

Delta’s woes are unlikely to affect the $8 billion privatisation in NSW, as companies are bidding for the rights to trade electricity output rather than assets such as power stations. The deal was part of a compromise to gain union support.